Panasonic has joined forces with Tesla Motors to build a large-scale battery manufacturing plant, known as the Gigafactory (pictured).

While Tesla does the heavy liftingpreparing, providing, and managing the land, buildings, and utilitiesPanasonic will step in to manufacture and supply the all-important cylindrical lithium-ion cells. It will also invest in associated equipment, machinery, and other manufacturing tools as part of the agreement.

Tesla chief Elon Musk has been eyeing this $5 billion electric car battery "Gigafactory" for a few months. The aim: reduce the cost of lithium-ion cells, therefore decreasing the price of Tesla vehicles.

"The Gigafactory represents a fundamental change in the way large scale battery production can be realized," Tesla Motors co-founder and CTO JB Straubel said in a statement. "Not only does the Gigafactory enable capacity needed for the Model 3 but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications."

Earlier this month, Tesla said its next-gen Model 3 Tesla electric car will go on sale in 2017 and retail for about $35,000.

As for the location of the Gigafactory, Tesla says that sites in Nevada, New Mexico, Arizona, and Texas are under consideration; California is also reportedly in the running. A selection is expected sometime this year.

Tesla intends to manage the factory while Panasonic serves as a principal partner. A number of other suppliers will join the assembly line, as well.

The Gigafactory, which will employ about 6,500 workers by 2020, is expected to produce 35GWh of cells and 50GWh of packs annually over the next six years. By co-locating suppliers on one site, Tesla can eliminate the packaging, transportation, duty, and inventory carrying costs typically associated with manufacturing.

"We have already engaged in various collaborative projects with Tesla toward the popularization of electric vehicles," Yoshihiko Yamada, executive vice president of Panasonic, said.

"And I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate the expansion of the electric vehicle market," Yamada added.

About the Author

Stephanie joined PCMag in May 2012, moving to New York City from Frederick, Md., where she worked for four years as a multimedia reporter at the second-largest daily newspaper in Maryland. She interned at Baltimore magazine and graduated from Indiana University of Pennsylvania (in the town of Indiana, in the state of Pennsylvania) with a degree in ... See Full Bio

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